When torrential rains inundated Central Texas over the July 4 holiday, triggering what experts classified as a “1,000-year” rainfall event, the devastation was swift and staggering.
The Guadalupe River surged to levels more than 30 feet above normal in hours, sweeping away homes, camps, and bridges. More than 100 people lost their lives, and property damage is estimated at $1.1 billion.
Beyond the human tragedy, the event underscores a shifting reality: flash flooding, long considered a secondary peril in many regions, is now at the forefront of risk assessments for both insurers and real estate investors.
Marshall Heron (pictured), national real estate practice leader at insurance brokerage Risk Strategies, part of the Brown & Brown team, told Insurance Business that the Texas disaster has put flood exposure squarely on the radar for carriers, even in areas previously considered low to moderate risk.
“In terms of claims paid and availability of coverage, we don’t expect this specific event to have a huge marketwide impact. But any time you’re writing exposure, it prompts insurers to pay closer attention,” said Heron.
He cited FEMA data stating that about 40% of all flood insurance claims stem from areas outside high-risk flood zones. “So, it’s not just the traditional high-hazard zones along rivers that insurers need to evaluate,” he added.
Despite growing awareness, flood insurance penetration in many states remains minimal.
In the case of Texas, some of the hardest-hit areas of Kerr County had fewer than 2 percent of households carrying policies through the National Flood Insurance Program (NFIP), according to Moody’s.
Property data firm Cotality estimated NFIP payouts from the July floods will total roughly $135 million, barely a fraction of the overall damages. This means that a vast majority of losses to be absorbed by homeowners themselves.
Heron noted that affordability is a significant contributor to underinsurance. “Even in what has been the most competitively rated segment of the market for flood insurance, rates are rising dramatically,” he said. “So many people are choosing not to purchase coverage.”
In the broader property market, premiums for standard coverage have started to stabilize, even soften, after several years of sharp increases. But flood remains an exception.
“For perils like floods in high-risk zones, availability is limited. With that lack of availability, rates remain high and deductibles are also significant,” said Heron.
Insurers are also expanding their due diligence beyond FEMA maps, according to Heron. Underwriters are drilling into topography, construction type, finished floor elevation, and even geocoding down to specific parcels. “All of these factors affect how exposure is underwritten and how carefully insurers and brokers need to evaluate it,” he said.
The forces behind rising flood losses are complex. Climate change is increasing storm severity and rainfall intensity. At the same time, urbanization is paving over natural drainage systems, while aging infrastructure fails to keep up with growth.
“Outdated systems combined with the increased severity of storms tied to climate change mean we’re seeing more flooding even in areas considered lower risk,” said Heron. “All of this is putting pressure on insurance coverage, rates, and availability.”
The implications extend well beyond insurance markets. Investors are rethinking exposure in flood-prone regions, which in turn puts pressure on property values. If insurance premiums rise or coverage is unavailable, that also impacts the desirability of those assets.
That uncertainty is especially problematic for institutional investors and lenders, who must weigh long-term asset stability. In some cases, lenders are tightening requirements for flood coverage before financing transactions.
For property owners and developers, Heron emphasized the importance of proactive risk management. The first step is understanding true exposure through flood zone determinations and site-specific assessments.
Practical measures include elevating finished floors above floodplains, using water-resistant building materials, and pursuing FEMA’s Letter of Map Amendment (LOMA) process, which can officially reclassify a property’s risk status.
“It’s important to have mitigation strategies ready and to communicate those to insurers to help negotiate lower premiums,” said Heron.
Still, there is little relief coming in the form of new insurance products or additional capacity. With few insurers entering the flood market and capacity dwindling, coverage often has to be “pieced together.”
“Sometimes a small limit is built into a master policy, with excess layers on top,” Heron said.
In this environment, brokers play a critical role. Heron stressed that their job is to guide clients through increasingly complex underwriting standards, identify coverage gaps, and negotiate mitigation narratives.
“It comes down to education,” he said. “Helping clients understand their exposure, their options, and how to position their property to get the best terms possible.”
